Solid Growth by Marston’s
UK regional brewer and pub operator Marston’s has reported a 7% rise in underlying operating profit to £168.3 million on group revenue up 9% to £782.9 million for the year ended 5 October 2013, driven by growth at its Destination and Premium outlets, Taverns (community pubs) and Brewing operations.
Ralph Findlay, chief executive of Marston’s, comments: “In 2013 we achieved good growth in turnover and operating profit despite significant challenges. This reflects our unstinting focus on what our customers want: excellent service and value for money in high quality pubs and bars. In 2013 we served 30 million meals, with food now the principal reason for around 80% of customer visits in our Destination pubs.
He adds: “Looking forward we will accelerate our high-return new-build programme whilst increasing the level of disposals from our lower turnover wet-led pubs. We have made an encouraging start to the new financial year and remain confident that our proven strategy is aligned to the underlying trends in the sector.”
The Brewing business increased revenue by 12.0% to £127.3 million and underlying operating profit by 3.0% to £16.9 million. Overall ale volumes were up 6% on last year, with premium cask ale volumes up 4% and bottled ale volumes up 19%. Hobgoblin saw growth of 16%, and is now the largest brand. Operating margin was down versus last year at 13.3%, reflecting the higher proportion of volume through the off-trade, which commands a lower margin percentage.
Disposal of 202 Pubs
Marston’s is disposing of 202 pubs for £90 million to NewRiver Retail, a leading specialist REIT focused on the UK food and value retail sector. This disposal is consistent with Marston’s strategy to target growth through investment in higher turnover pub-restaurants, improve the quality of its estate and reduce its exposure to smaller wet-led pubs.
The disposal comprises 158 community pubs from Marston’s Taverns estate and 44 Leased pubs. Under the terms of the transaction Marston’s will manage the pubs for five years in return for a management fee. For the first four years Marston’s has provided a minimum income guarantee.
Based on EBITDA of £11.8m (net of the management fee) and operating profit of £10.4 million for the year to 5 October 2013 the transaction represents an exit multiple of around 7.6x EBITDA. The pubs have a book value of £119.5 million of which £37.4 million is represented by previous revaluation surpluses.
“This disposal will enable us to reduce the cost of servicing our securitised debt, is consistent with our strategy and improves the quality of our estate,” explains Ralph Findlay. “It will also assist with financing the accelerating rollout of our new-build pub-restaurants which are achieving good returns.”
